Egypt c.bank tightens dollar trading band

Cairo, February 4, 2013

Egypt's central bank has tightened the pound's trading band in the interbank foreign exchange market in an apparent move to slow the currency's decline, a forex dealer at a Cairo bank said on Monday.

Banks may now only buy or sell dollars or their equivalent to other banks in a band of 0.01 pounds above or below the weighted average bid at the central bank's regular currency auctions, the dealer said.

Previously, the limit had been 0.5 per cent above or below the average bid.

Political strife has triggered a flight into dollars and other foreign currencies, putting renewed pressure on Egypt's foreign reserves.

Earlier the central bank signalled that it was cutting back on the currency sales introduced to shore up its foreign reserves after a run on the pound linked to the country's political crisis.

A day after new central bank governor Hisham Ramez took up his post, the bank sold $73.1 million in at its 17th foreign exchange auction on Monday and said it would hold the next one on Wednesday.

The change points to the central bank holding two foreign currency auctions this week instead of the three it has held over the last few weeks.

After introducing the foreign currency sales on December 30, the central bank had initially held daily auctions. It later reduced the frequency to three times a week, holding the auctions on Sundays, Tuesdays and Thursdays.

The bank gave no further details on the timing of further auctions in a brief statement.

The pound has weakened steadily since the end of last year, losing nearly 8 per cent of its value on the interbank market and taking its losses against the dollar to 13.4 per cent since the 2011 uprising against Hosni Mubarak.

The central bank said in December that Egypt's foreign currency reserves had fallen to a critical level. They currently stand at around $15.5 billion, less than half their level on the eve of the uprising against Mubarak.

The cut-off price for the 17th auction was at 6.6920 Egyptian pounds to the dollar compared with 6.6820 at the previous auction on Thursday. The central bank had offered $75 million at Monday's auction.-Reuters